The windfall that might feel the draught

Free share update: Bristol & West customers advised to sell quickly

It's free shares time again - but this time round stockbrokers are recommending people to sell straight away. Last week saw stock market dealings start in a special type of windfall - preference shares or "prefs" - issued by Bristol & West to more than 300,000 of its savers and borrowers as part of its takeover by Bank of Ireland.

Most of B&W's saver members are due for cash windfalls averaging more than pounds 1,000 and payable by mid-August, but borrowers and recent savers were last week given a flat distribution of 250 of the prefs with an estimated worth of just pounds 250. The shares traded close to their opening price of 103p all week, and the 100,000 people who opted to sell straight away for free will get pounds 258, payable over the next week or so either into a B&W account or by cheque.

The price of the prefs did rise a little last week but they do not have the same potential for long-term increases in value as other windfall shares. Prefs pay a fixed annual income - in this case 8.125 per cent - but do not share in the profits of a company in the same way as other shares. Instead their price tends to go up and down in line with government gilts (bonds).

The income on B&W's prefs - with the first half-yearly payment due next May - may seem reasonable. But unlike other shares (and many bonds) these prefs cannot be put in PEPs, so that income is taxable.

NatWest Stockbrokers says individual prefs like these are not an ideal investment for small savers and over time could become more difficult to sell. B&W created the prefs because the windfall rules barred it from giving cash to recent savers.

Savers who chose to keep the shares should receive their certificates this week. But they can still take advantage of a free selling facility set up by B&W until 7 September.

The next windfall due is the handout of free (ordinary) shares from Northern Rock, due to start trading on the stockmarket on 1 October. These could be worth as much as pounds 1,500 a head. Cash windfalls due to Scottish Amicable policyholders as part of the mutual insurer's takeover by Prudential will also be paid out in October. Birmingham Midshires remains the firm favourite to be the next building society to announce a windfall, following reports that it is in talks to be taken over by Royal Bank of Scotland. It is no longer possible to open a new membership account with the society, however.

q B&W helpline 0800 886633.

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